~ Perspective from Vancouver

Dealing With Disruption

Here on Price Tags, we’ve published a few articles on pending disruption in the motor vehicle industry from autonomous vehicles. While it’s far from clear what will ultimately happen, at what rate, in which sectors first and which company will dominate — major disruption is no doubt underway.

The Economist has produced this nifty video on the disruption now facing fossil fuel-based energy companies. The video (length 14:48), looks at two large European energy companies, a village, their plans and the investments they all are making in transition to a post-carbon (or diminishing carbon) world. It’s the latest in a series they’re doing on disruption of industries.

Meanwhile, here is BC, we double down on production of fossil fuels, complete with fuss-free shipment facilities for any and all fossil fuels from anywhere. Never mind the possibility of massive stranded assets. Presumably, BC’s coal shipment volume projections just rise and rise. Our thinking seems mired in 1957.

Noteworthy to me are the massive opportunities described here as part of the transition.

Thanks to The Economist for this video.

Alternative energy is forcing fossil-fuel giants to reinvent themselves. Find out how in the latest film in our new series, “The Disrupters”, which examines industries undergoing transformation.

An excellent point, Urbinflux. Even climate scientist and Green MLA Andrew Weaver supports the mining and use of metallurgical coal while rejecting all forms of lower grade thermal coal, which has become one of the top contributors to the elevated carbon levels in the atmosphere and oceans.

One thing we don’t do well here in Canada is innovate, patent and R&D on permanent commercialization of the products that evolve from the creative and research process. Canada should be a leader in research and developing new steel-making processes with a lower carbon footprint, and doing it here at home where value-added leverage will contribute orders of magnitude more benefits to the economy than exports of raw resources. Recycling steel could take place in BC using electric arc furnaces powered by clean hydro and geothermal.

What does stick in the craw, though, is that the Port of Vancouver does indeed export US thermal coal for Asian power plants, whereas all other west coast ports in the US denied access. The coal terminal docks will create 50 permanent jobs, if they’re lucky. Like the BC economy would collapse without them. The Port is an arm of the federal government. Time to grow a pair, Justin, and make an easy decision before the hard one on Kinder Morgan.

You mean like from the Quinsam Coal mine? Shut due to low prices. Everyone knows thermal coal is next to worthless, and will continue to be for a long while.

When coal is next to worthless, you can’t pay to ship it very far and make money on it. Hence why most coal mines are located really close to a coal power plant. Excavate and burn on site.

I’ve been to Quinsam, and I can’t think of another mine that makes thermal coal as their primary product. The Teck mines might make some as a byproduct, since some layers may have higher or lower carbon content. Metallurgical coal has higher carbon content, as in almost graphite.

You knew this was going to be biased when opening statements were condescending and used finger quotes. There is a stated assumption in this video that we cannot live without oil. We all acknowledge it will take time, but we already have the technology if not yet the capacity to do so. Capturing the tiny fraction of carbon emissions resulting from extraction while profiting from the sale for burning it is still immoral.

The tone seemed to be that the giant has suffered a flesh wound but will rise to greatness once again. A defensive against the divestment movement.

Of course we probably all had a groan when they boldly stated that renewables aren’t viable without subsidies.

First they denied global warming.
Then they denied it was caused by humans.
Then they claimed nothing could be done.
Then they claimed it would be too expensive.
Now they claim that they will be viable with a minuscule fraction of investments in renewable technology while gobbling up fossil subsidies that should go to clean energy.

They haven’t yet run out of market share but they are running out of propaganda.

Statoil is a public oil company owned by Norway. It’s financial management policies and the government refusal to subsidize its annual budgets with revenue from an unconventional non-renewable and quickly depleting resource (deep North Sea oil and gas reserves) are the primary reasons why Norway has a sovereign wealth fund that exceeds one trillion US dollars in value. Ironically, they modelled the wealth fund on Alberta’s Heritage Trust Fund (equally endowed with unconventional oil with a similar population). The wildly radical differences in financial management and political philosophy is so obvious it makes you wonder how Alberta and Canada could have screwed it up so badly.

Norway, through Statoil, could afford to make a very bold move and invest so much money into renewables that prices could come down yet another cluster of steps, just as they did when China started mass-producing renewable energy products after Germany led the way. It is possible that Norway could now afford to wind down its oil production. But affording it is different than the control and influence vested interests may have in politics to keep the flares lit, and the atmospheric carbon ever c.oser to the 450 parts per million point of no return.

Technical feasibility and finances are no longer issues that would prevent a mass worldwide move to renewables, and changing out land transportation fuels from carbon to clean electricity is a good start. But private money in politics is a major barrier to overcome, more so here than in Norway. In BC look no further than the presence of Petronas and road building consortium executives on the invitation lists at Christy’s $20K a plate lunches. In Canada, look no further than the CVs of NEB committee members. In the US, the money from Koch Industries and all the “independent” institutes it supports leave well-worn trails into the pockets of Congress and the Senate, which happen to be the largest barriers to decarbonizing the US economy.

The world crossed the Rubicon from conventional to unconventional oil in 2005. Alberta and Norway alike have run out of affordable oil. You are once again confusing the entire body of a resource with the tiny fraction that is technically and financially recoverable. I doubt even a world price of $300 a barrel would be enough to exploit and sell oil found 7,500 m below the ocean’s floor, or embedded in clay 500 m under Athabasca Lake, or the dregs left locked in solid rock now that the sweet spots have been fracked out the shale. The last time oil hit even half that price a world recession occurred. Fossil fuels are cumbersome, volatile and very troublesome commodities with extraordinary external impacts, not the least on cities.

On your other distractions:

–Quebec, Ontario and BC are now paying equalization funds to Alberta. Let that be a lesson of faith in dependency on a single commodity, and the Banana Republic public policy mismanagement that got them into that predicament, like squandering an inheritance.

–Norway has high taxes. So what? You get what you pay for, and many public services have great utility and inherent high values to society (e.g. healthcare) and irreplaceable at par by the private sector (e.g. public roads and transit). The value of public services to the Norse is evidently so high that they continue to exercise their freedom to vote for governments to continue staying the course. It’s the height of economic foolishness to subsidize public budgets with revenue from a volatile, non-renewable commodity. Even more so to just give it away to citizens in times of good and saving nothing for the rest.

–Oh, immigration …. again. Well, both sets of my grandparents emigrated in the early 20th Century, worked hard and had lots of kids. The total value of taxes paid to date by them and their successive generations of progeny, now over 400 people, and until the youngest generation today retires, will probably exceed $100 million, assuming a total of $250,000 in all taxes paid during a lifetime. That is likely quite conservative. Throw in the economic multipliers of average employment income, spending and savings over several decades by most individuals and it’s now hundreds of millions. Welcome to Canada, land of immigrants.

–On civil service salaries, do you really think reiterating that point over and over here will have any result? Run for office, Thomas. Put lowering public sector salaries in in your campaign advertising. See how far you can take it. Here’s a suggestion: Put lowering egregiously overpaid private corporate CEO’s salaries in there too, which the public ultimately pays for through product prices and service fees. You’ll quintuple your votes and may actually become premier.

yes, we can agree, that some CEOs are overpaid, but often it comes in the form of options and stocks, not salaries.

Canada is moving to the Scandinavian welfare model, with high taxes, expensive energy and an ever increasing nanny state. Over 50% of all babies in Sweden are now born to unwed mothers. cash is also illegal now in Sweden. Only electronic money is now allowed so the state can track everything.

Some people like that model, many do not. We shall see if we will get there or if we find a better model combining the best of Europe and the best of US, as we used to. We shall see.

“Cash is certainly not dead. The Swedish central bank, the Riksbank, predicts it will decline fast but still be circulating in 20 years. Recently, the Riksbank issued newly redesigned coins and notes.”

Sometimes those on the “green” side of things brand resource extraction companies as dumb or willfully blind to the consequences of their actions, but I think they’re very smart to be pushing for increased production, more pipelines, etc. They know that 100 years from now their products will be worthless, illegal or both so they’re rushing to get them out of the ground as quickly as possible. The rush creates a glut and suppresses prices, but better a low price than none at all. From an economic standpoint they’re taking the most rational option available.

Obviously there’s more at stake than economics, but that’s fodder for another comment another time.

In the case of US shale (the entity that created the glut) most companies are so financially over-stretched that they are pumping like mad just to make the loan payments. However, the fundamental problem is not necessarily down to economics. Geology and the laws of physics underwrite everything. Countering the production madness are very steep decline rates, and the two are going to collide sometime before 2020. OPEC and Iran will have only a limited control over the world supply beyond that because the largest conventional oil reserves have already peaked out.

In this context, Canada’s ancient tendency to extract and ship raw resources and build a big hunk of the economy around this dependency seems so archaic and out of touch.

The major difference between Europe and NA is access to cheap energy. One of the main reasons for the relative wealth of NA over Europe is its historically low energy costs, due to hydro, nuclear and ample coal, gas and oil extraction. Europe has an aging population, very high taxes AND high energy costs. Europe depends on Russia for a substantial part of their energy (gas) imports.

A good interesting mini-series to watch, in Norwegian with English subtitles: Occupied (showing occupied Norway as it shifts to only green energy and is held hostage by Europe as Russia invades and occupies it)

We seem to think that is a great model to follow, namely increased taxes and far higher energy costs, by blocking all sorts of energy related development, refinement and export systems.